An Inside Look at Kenya’s Off-Grid Microgrids and the Rising Pay-Go Market

After establishing itself as a U.S. developer of solar energy and solar-storage microgrids for businesses in the US, the Atlanta, Ga. company is now expanding its boundaries, self-financing and launching construction of three pay-go microgrids on three Kenyan islands in Lake Victoria.

Renewvia intends to build another 10 off-grid microgrids on sites stretching from Lake Victoria to Kenya’s Indian Ocean. In doing so, the company expects to connect 4,000 Kenyan homes and business to its pay-go solar microgrid network by the end of this year.

Microgrid Knowledge interviewed Renewvia CEO Trey Jarrad for an inside look at developing off-grid microgrids in Kenya. Jarrad describe the benefits and challenges doing so presents, and how the company got involved in projects so far from its home base and so different in nature than those it has completed to date.

Solar fish house

Searching far and wide for new microgrid market opportunities that make a difference

Renewvia initially began evaluating microgrid market opportunities internationally in 2013 in anticipation of the phase out of the US renewable energy investment tax credit. Management “was more interested in markets and geographies where solar was needed and worked subsidy-independent and where it made the biggest difference,” Jarrad explained.

That led Renewvia to consider Sub-Saharan Africa, where multilateral agency initiatives, such as US Power Africa, were beginning to gain real traction in terms of developing a viable, off-grid solar industry ecosystem and market.

Renewvia’s slate of 10 off-grid microgrids came about in the wake of the company completing an African microgrid feasibility study funded by the US Trade and Development Agency (USTDA) last year.

The USTDA was seeking US-owned firms able to cost share and take on risk in the rural electrification sector.

“Not many in the market were willing to take any risk to evaluate the opportunity,” Jarrad said.

Producing the feasibility study for the trade and development agency led directly to development of “a finance-able, investment-grade product that will yield returns for both Kenyans and US solar product manufacturers,” said Pam Onyanyo, Renewvia’s director of Sub-Saharan Africa.

“Microgrids will bring the first reliable, affordable and scalable source of power without a large upfront investment and the risk of managing assets as one would be required if purchasing a solar kit for their business or home,” Jarrad added. “Microgrids can scale as lifestyle and community needs change.”

Helping improve human and environmental health and livelihoods

Renewvia’s Kenyan pay-go microgrid business model is centered on generating revenues via individual customer subscriptions. The company is investing its own capital to build out its pay-go network at the moment. Also in discussion with institutional investors, it’s exploring the possibility of raising capital externally via conventional, structured financing to implement this new, unsecured revenue model.

By conveying all the benefits affordable, reliable, efficient and pollution-free electricity can provide to those that have not known them, the off-grid microgrids could give Kenyan island residents a big leg up the ladder in terms of raising incomes and improving overall quality of life.

“Health benefits are the most substantial for the areas we are serving due to the prevalence of solid fuel and emissions,” Jarrad said. “There are high levels of respiratory conditions in these areas due to consistent inhalation of kerosene and charcoal. Also vision problems from kerosene fumes.”

Jarrad also pointed out productivity increases for households from water pumping. Carrying water in these communities is a laborious, time-consuming process typically done by women and children.

Off-grid microgrids: The economic case

The rates customers are being charged for off-grid solar microgrid generation in Kenya are three to five-times less than those for petrol/fossil fuel energy in equivalent kilowatt-hours. Furthermore, pay-go microgrids are 10-15 times less expensive than the fees entrepreneurs who operate community kiosk generators charge customers to recharge phones and batteries, Jarrad explained.

Microgrids also bring “the very material benefit of improved respiratory health from the reduction or elimination of fumes in the households using solid fuels for cooking and heat,” he said.

In addition, Renewvia expects community water pumping, storage and purification efforts to be implemented at the local government level immediately. “This works well for the microgrid developer and community,” Jarrad commented, in that it speeds up time to deployment and improves health and sanitation.

A large, increasingly viable market opportunity

In its 2017 annual report, the US government’s Power Africa forecasts total population in Sub-Saharan Africa will surge 81 percent between 2015 and 2040, an increase of 755 million people, according to Renewvia. In addition, the company notes that the US Agency for International Development estimates that more than 70 percent of the African continent lacks access to reliable power.

Electricity generation in Sub-Saharan Africa will need to double to keep pace with rapid population growth and the accompanying rise in electricity demand, according to Power Africa. Hence, Renewvia “sees the market as an important humanitarian cause and a ripe and untapped energy market.”

Less costly, less risky solar microgrid payments

Mobile e-payments technology is playing a pivotal, central role in Sub-Saharan Africa’s fast growing pay-go solar energy home and small business market. That’s true in Renewvia’s off-grid, island microgrid projects as well. But company says its pay-go systems model and architecture is a bit different than competitors’.

Others link directly to a wireless telecoms carrier’s mobile e-payments service and network. Renewvia, by contrast, interfaces directly with banks. In turn, the banks may interface directly with wireless telecoms carriers and mobile e-payments systems, Jarrad explained. That removes telecom carriers as an intermediary agent, thereby making for less costly and less risky financial transactions.

Secret sauce

Renewia’s African microgrid aspirations extend well beyond Kenya’s borders. The company has been adding employees in Lagos, Nigeria and Jinja, Uganda, as well as in Nairobi, Kenya and its headquarters in Atlanta.

Jarrad offered some words of wisdom for others considering investing in Sub-Saharan Africa’s off-grid solar or microgrid markets. “The regulatory environment is dynamic. The developer must be willing to take some regulatory risk and anticipate future regulation based on best practice in the sector and accepted code in the nearest major market,” he said. “Community is key! No matter what regulation is enacted and/or followed, if the community is not accepting and supportive of the task and developer, the initiative won’t work…It is the secret sauce in this space for the time being.”